By Pat Zaby
For many buyers, the mortgage rates of the last few years created an expectation that anything above 5% feels too high. However, as real estate professionals, we have an opportunity to reshape this narrative and help clients understand that the ultra-low rates during the pandemic were an exception—not the rule.
As rates settle into historically typical ranges, we must provide perspective that helps buyers see the big picture. The Mortgage Rate Affordability Index™ (MRAI) is a simple yet powerful way to compare today’s rates to long-term historical norms and focus on why homeownership remains a smart financial move.
Bringing Clarity to the “New Normal”
The reality is that mortgage rates have fluctuated based on economic conditions, inflation and Federal Reserve policies for decades. Over the past 50 years, the average 30-year fixed mortgage rate has been 7.74%. As of March 27, the rate of 6.65% is actually lower than what past generations have faced when buying a home.
This is where the MRAI helps buyers see beyond the headlines. The MRAI compares today’s rates to the 50-year average. When the index is above 100, it signals that mortgage rates are currently more affordable than historical norms, reinforcing that buyers still have an advantageous opportunity.
Mortgage Rate Affordability Index™ = (50-yr Avg Rate/Today’s Rate) x 100
Mortgage Rate Affordability Index™ = (7.74/6.65) x 100 = 116
What does this mean for buyers?
- A score above 100 indicates today’s mortgage rates are 16% better than historical norms, meaning financing a home is more affordable relative to past decades.
- If buyers are waiting for 3% mortgage rates to return, they’re waiting for an anomaly, not a reality.
- This reinforces that NOW is still a financially favorable time to buy.
Helping Buyers See the Bigger Picture
Instead of letting buyers get caught up in short-term rate concerns, guide them toward a wealth-building mindset by focusing on long-term financial benefits:
- Homeownership Accelerates Wealth Accumulation – Every mortgage payment contributes to building equity, allowing buyers to grow their net worth over time, while renters miss out on this key wealth-building opportunity.
- Equity Grows with Every Payment – Mortgage amortization means each payment reduces the principal balance owed, increasing home equity automatically—a financial advantage renters don’t have.
- Home Values Continue to Rise – Even at a moderate pace, appreciation helps
- homeowners build wealth simply by owning. Renters, meanwhile, are at the mercy of rising rents with no return on their payments.
- Refinancing is Always an Option – If rates drop in the future, buyers can refinance to lower their payment, but waiting too long may result in paying more for the home itself.
The Takeaway: Giving Buyers a New Perspective
As real estate professionals, we play a crucial role in helping buyers shift their mindset from short-term hesitation to long-term financial strategy. By introducing the Mortgage Rate Affordability Index, we can help them see that today’s market remains historically favorable and that waiting may cost them more in the long run.
Now is the time to educate, empower and guide buyers toward informed decisions. Let’s help them stop chasing a mortgage rate that may never return and start focusing on the wealth-building power of homeownership.
